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Chegg Prices Its I.P.O. at $12.50 a Share

(New York Times) – Chegg, a start-up focused on textbook rentals and academic services, priced its initial public offering on Tuesday at $12.50 a share, exceeding expectations.

At that price, the eight-year-old Chegg will have raised $187.5 million. The I.P.O. will also value the company at nearly $1.1 billion.

It will begin trading on the New York Stock Exchange under the ticker symbol CHGG.

Founded in 2005, Chegg focuses primarily on renting textbooks for a semester at a time, with 180,000 titles in its catalog. But the company is building its electronic services, which it sees as its future. It offers more than 100,000 electronic textbooks and has rolled out offerings like helping high school students find colleges and scholarships.

In the prospectus, the company says it reaches about 30 percent of all college students in the country and 40 percent of college-bound high school seniors.

Chegg said it earned $22.7 million in adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, for the nine months that ended Sept. 30, a metric that excludes certain costs like stock-based compensation. That is up nearly fourfold from results in the period a year earlier.

Still, a number of big players are betting that Chegg’s future will be bright. Among its stockholders are Kleiner Perkins Caufield & Byers and Insight Venture Partners.

Most of those investors aren’t selling their shares, and the bulk of the I.P.O.’s proceeds will go toward building the company. But Aayush Phumbhra, one of Chegg’s co-founders, will pare down his stake by about 23 percent, to nearly two million shares.